Trend 1: The confluence of energy, transportation and technology sharpens

Trend 1: Confluence of energy, transport and technology

Highlights

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“An opportunity exists for the Canadian government to leverage significant benefits with funding approaches that evaluate our full system of infrastructure, not just single assets in isolation. The new carbon pricing initiative may be an opportunity to bridge the current gap in how we evaluate and fund infrastructure in Canada.” - Stephen Prendiville, Infrastructure Partner, KPMG in Canada

The traditional lines between energy, transportation and technology have been blurring for years. But as governments start to think more holistically about their long-term infrastructure objectives, many are starting to recognize the need for a new approach. Failure to address the increased connectivity between energy, transportation and technology will result in poor investment decisions.

All signs suggest that the confluence between the sectors is about to sharpen and demand for energy is set to increase dramatically. Consider, for example, the careful balance governments will need to strike as they implement a low-carbon transportation agenda while simultaneously striving to shift energy generation towards renewables, all while addressing demand and supply imbalances in the network. Or the pressure that the electrification of heating will put onto the existing power grid in the less temperate developed markets.

The challenge will be sharper still in many of the developing markets where the ability of government – particularly at the city level – to respond to growing demand for energy, transportation and technology will underpin economic growth and social harmony.

Over the coming year, we expect the more responsible governments to look for new ways to improve alignment and drive integrated planning across the three sectors. In some cases, this will require the establishment of new structures that encourage shared investment and planning across different government departments. In other cases, it may be driven by focused leadership and strong policy direction.

We also expect this year to bring some exciting developments and ideas that will continue to disrupt the way governments and consumers view energy, new transportation and technology. These changes will occur at the macro level (economy/city-wide) and at the micro level (individual consumer/citizen behaviors). This will not only lead to a shifting of priorities (as we note in Trend 4), but also significant challenges as governments decide which technologies to invest in and when.

This is the beginning of a long journey, so while there may currently be more talk than action, we believe that this is a good sign: transparency in public discourse is a necessary precursor to real change.

The long view

The next 15 to 20 years will be difficult for governments as they balance increased demand for low-carbon energy against the realities of their current energy mix. On the one hand, nobody wants to own a brand new – but soon to be obsolete – asset. But at the same time, we can’t afford to gamble on the belief that disruptive technology will save the day. Disruption is not an excuse for inaction.

For the developing world, this confluence of energy, transportation and technology will create significant opportunities to leapfrog the west, for example by harnessing the benefits of distributed generation such as solar plus storage. Indeed, we have already reached cost parity between thermal and solar power in a number of markets. But delivering against growing demand for energy-intensive technology and electric transportation will be a continuous struggle. The reality is that – as incomes rise and the middle class expands – demand for energy in all its forms will grow exponentially.